1 June 2012 | By Tony Travers
As economic crisis turns to political crisis across Europe, what are the lessons for local democracy here? The May 3 elections sent out some strong messages on mayors, majorities and political mandates – but is anyone in Whitehall listening?
Europe’s voters are getting fed up with austerity. May’s election results in France, Greece and (at the local level) Britain suggested that people want an end to the gloom and doom that has dominated politics since 2008. Indeed, it will soon be five years since the Northern Rock bail-out in September 2007 – an event that turned out to signal what will be the longest period of low growth in the UK since 1945.
Nor is there any end to it. Greece remains an ominous threat to the eurozone, and so to growth in the UK. Spain’s banking system is in a dreadful condition, risking a collapse of economic confidence from the Peloponnese to Lapland. It is against this unremittingly glum backdrop that public services must now operate for, it would appear, years to come.
If there are straws in the wind for the future of UK politics, they suggest a mild revival of the European political Left, albeit against a backdrop of no particular model to replace the one that led to the current dire straits.
New French president François Hollande promises a milder form of austerity in France, but no radical change to that country’s economic system. He will be eagerly observed on this side of the Channel. If growth is faster there than here, Labour will use it as evidence that Ed Miliband could do the same in the UK.
But if the UK grows faster than France, or turmoil hits the French economy, Chancellor George Osborne will say: ‘Look, I told you so.’
Radicalism on the Continent was paralleled by milder change in England, Scotland and Wales with Labour making significant gains in the May elections.
There were also referendums in ten English cities as to whether or not they should introduce directly elected mayors. It turned out to be ‘not’ in all but Bristol, with Birmingham, Manchester, Leeds and Newcastle among those voting for the status quo. In Liverpool, which had decided by a vote of the council to adopt the mayoral model, Labour’s Joe Anderson was easily elected to the new office. He joined Boris Johnson, who defeated Ken Livingstone, as one of three ‘big city’ mayors in the country – Sir Peter Soulsby in Leicester being the third. Bristol will elect its first executive mayor on November 15.
The public’s response to the experiment was as underwhelming as it was when Labour pioneered elected mayors in the 2000s. It is almost certain that the coalition’s unpopularity undermined support for mayors this year, as did its failure to really make a case for this style of local governance. But the mayoral damp squib also raises wider issues – about the future of our cities and of localism itself.
Put simply, have austerity and political apathy undermined enthusiasm for local politics? Have we reached our collective city limits?
In fact, in Liverpool as in other major cities, there was an important debate about whether the mayor should operate at the ‘city’ or ‘city region’ level. There are powerful arguments for aligning across the region because the economy of a wider metropolitan area is dependent on the core city. Transport, fire and police services operate at this level.
There are loud echoes here of the debate that led the 1966–1969 Royal Commission on Local Government in England (the Redcliffe-Maud commission) to consider ‘city regions’. Commission member Derek Senior published a memorandum of dissent, which argued for a network of city regions (with a second tier of districts) across the country. The unloved metropolitan counties were introduced as a partial, watered-down, version of the idea in 1974, although Margaret Thatcher abolished them 12 years later when she was prime minister.
Manchester has created a ‘combined authority’ for the ten-district Greater Manchester area. With a powerful, dynamic and articulated style of city-region leadership, the area has shown how it is possible to deliver consistent policies across a voluntary city-focused region. Other large cities have looked at the Manchester model and begun to evolve their own versions of city-region dynamism. But there are big questions about the resources and political will that will be necessary to roll out this model.
The government needs to support new mayors and city-based governance arrangements with a substantial shift of powers away from Whitehall. The new ‘city deals’, which allow the eight largest core cities to specify the powers they need to boost local economic growth, have proved complex and tortuous to negotiate. Nor is it clear why central government, which is generally unwilling to cede power to any local institution that is not controlled from London, will deliver on this objective. Schools are now little more than satellites of the Department for Education.
The national economy needs cities and their regions to function much more productively in the future. In fact, they are vital engines for the much sought-after economic growth. However, government policy in this area appears to be having a negligible, or invisible, effect. A recent report from the National Audit Office pointed out that employment supported by the Regional Growth Fund had cost about £33,000 per additional job generated. This compares with £28,000 per job created by the now-abolished regional development agencies.
Moreover, the NAO stated: ‘We cannot say what the Fund’s contribution will be to rebalancing the economy in any particular area in the longer term’ or if the fund will assist cities towards greater entrepreneurship and job creation.
Policies, such as the RGF, infrastructure investment, changes to the tax system and next April’s reforms to business rates are the closest the Coalition has come to an economic policy to boost growth. With official figures suggesting the country is now in a second recession and the eurozone providing little joy, there is a powerful political imperative to deliver an economic recovery. Governments that cannot show signs that the recession is ending look set to lose office at the first opportunity available to voters.
National politicians appear increasingly enfeebled as the catastrophic endgame of the eurozone crisis lurches towards us. Summits of European leaders, the European Central Bank or the International Monetary Fund lead to last-minute action to stave off disaster for another month or two but, like the climax of a horror film, there is always another shock.
Opinion polls in the UK show the electorate believes all three major party leaders are under-performing. In one recent YouGov poll, the net ‘doing badly’ figure for David Cameron, Ed Miliband and Nick Clegg was 29%, 23% and 54% respectively. Gloom about the future of the UK economy and households’ finances appear overwhelming – all of which is felt even more keenly at the local level.
Turnout at May’s local elections in England was 32%, and only slightly higher in Scotland. At the 2010 UK general election, the figure was 65%, one of the lowest in modern times, though slightly better than the 59% achieved in 2001. It is almost a cliché to speak of ‘voter disengagement’, but there can be no doubt the electorate is becoming less attracted by conventional parties, leaders and policies. Continuing pressure on the political system created by the impact of the eurozone’s difficulties is likely to incite further anger on the part of voters.
Many of the government’s public service reforms will begin to take effect during 2013 against this backdrop, often with significant implications for local authorities. In particular, the NHS reforms and Universal Credit will begin to bed in, leading to unpredictable impacts on services and households. At the same time, public health will transfer to local government from primary care trusts while Council Tax Benefit will be ‘localised’. Fifty per cent of the national non-domestic rate will be locally retained from next April, with the inevitability of winners and losers as the impact of tax base incentives begin to be felt. Planning reforms, notably neighbourhood forums, will get going in earnest in 2013. Finally, several reforms affecting social housing, notably a move towards higher, market-related rentals and constraints on ‘under-occupation’, will also have their first effects next year.
Next year will, to put it mildly, be a ‘Big Bang’ year for the public sector. Against the economic, financial and political backdrop outlined above, it is hard to guess what the public response might be to reforms that caused dislocation or a reduction in service quality. Of course, the government has introduced this raft of reforms because it wishes to shake things up. But most of the legislative changes made during 2010 and 2011 will affect services in unpredictable ways. No one really knows how, for example, reforms to the benefit system will affect families and households. If the economy continues to stagnate, people will be given incentives to take work in an enfeebled labour market with few, if any, new jobs.
Local government and councillors (and, indeed, MPs) are likely to have an important role as the impact of public service reforms is felt. Councils will assume public health responsibilities as they face a new incentive-driven local government finance system, offering authorities the possibility of keeping growth in both the business rate and council tax base. But councillors and their officials will also be in a position to judge how public service reforms are playing out on the ground. This is an opportunity for local government to assess the impact of the coalition’s policies and guide them.
Central government itself has very little capacity to monitor the effects of its policies, still less to take action to reduce any failures. The Home Office’s slow and inadequate response to recent immigration queues at Heathrow and Stansted airports is, along with defence and IT procurement problems in Whitehall, a living monument to the centre’s incapacity to manage operational services and projects. The need to bring in ex-local government chief executives to manage the more awkward Whitehall agencies attests to the skill and quality of council officials.
We are now a year and a quarter into what might be a decade of public sector austerity. Only a small part of the overall spending reductions that will have to be made have yet occurred. Even if the government changed path, or if Labour won the next election, it is unlikely there will be a return to significant growth in public expenditure before the early 2020s.
The world – or at least Europe – has changed in ways that will shape both the public and private sectors for a generation.
This reality leaves the current generation of UK party leaders with a problem. David Cameron, Ed Miliband and Nick Clegg (and, indeed, Carwyn Jones, Peter Robinson and Alex Salmond) are conventional politicians who will now have to watch the world as it changes and subsequently react as best they can.
UK prime ministers and Opposition leaders are by no stretch of the imagination in charge of their own destinies at present. Germany’s Angela Merkel and China’s Wen Jiabao now control financial levers that even Barack Obama cannot pull. Meanwhile, the US is following the UK down the road of relative economic and political decline.
Chancellor George Osborne’s Plan A has been undermined by the crises in Greece and other southern European countries. His shadow, Ed Balls, would not be immune from the same forces if he were chancellor. Ironically, just as national politicians face a deepening credibility crisis, the government’s localism project has also lost much of its lustre. Perhaps this is inevitable in a period of such deep public cynicism and gloom.
What UK national and local politicians need to do is to make clear to the electorate what the future realities are likely to be for this country’s economy and public services. There will be no return to big real-term rises in health and education spending for several years. The main focus must be the generation of private sector jobs and output in all parts of the UK.
The public sector will have to take second place to this overriding objective, however unpalatable this might be. Only infrastructure investment is likely to buck this trend. Unless the economy can be fixed, resources for public services will remain limited for a generation.
The good news is that cities and city-regions – if only politicians will find ways to reboot them – can be part of the solution, not the problem.
Tony Travers is director of the Greater London Group at the London School of Economics and a well-known commentator on local government
This article first appeared in the June edition of Public Finance
As economic crisis turns to political crisis across Europe, what are the lessons for local democracy here? The May 3 elections sent out some strong messages on mayors, majorities and political mandates – but is anyone in Whitehall listening?
Europe’s voters are getting fed up with austerity. May’s election results in France, Greece and (at the local level) Britain suggested that people want an end to the gloom and doom that has dominated politics since 2008. Indeed, it will soon be five years since the Northern Rock bail-out in September 2007 – an event that turned out to signal what will be the longest period of low growth in the UK since 1945.Nor is there any end to it. Greece remains an ominous threat to the eurozone, and so to growth in the UK. Spain’s banking system is in a dreadful condition, risking a collapse of economic confidence from the Peloponnese to Lapland. It is against this unremittingly glum backdrop that public services must now operate for, it would appear, years to come.
If there are straws in the wind for the future of UK politics, they suggest a mild revival of the European political Left, albeit against a backdrop of no particular model to replace the one that led to the current dire straits.
New French president François Hollande promises a milder form of austerity in France, but no radical change to that country’s economic system. He will be eagerly observed on this side of the Channel. If growth is faster there than here, Labour will use it as evidence that Ed Miliband could do the same in the UK.
But if the UK grows faster than France, or turmoil hits the French economy, Chancellor George Osborne will say: ‘Look, I told you so.’
Radicalism on the Continent was paralleled by milder change in England, Scotland and Wales with Labour making significant gains in the May elections.
There were also referendums in ten English cities as to whether or not they should introduce directly elected mayors. It turned out to be ‘not’ in all but Bristol, with Birmingham, Manchester, Leeds and Newcastle among those voting for the status quo. In Liverpool, which had decided by a vote of the council to adopt the mayoral model, Labour’s Joe Anderson was easily elected to the new office. He joined Boris Johnson, who defeated Ken Livingstone, as one of three ‘big city’ mayors in the country – Sir Peter Soulsby in Leicester being the third. Bristol will elect its first executive mayor on November 15.
The public’s response to the experiment was as underwhelming as it was when Labour pioneered elected mayors in the 2000s. It is almost certain that the coalition’s unpopularity undermined support for mayors this year, as did its failure to really make a case for this style of local governance. But the mayoral damp squib also raises wider issues – about the future of our cities and of localism itself.
Put simply, have austerity and political apathy undermined enthusiasm for local politics? Have we reached our collective city limits?
In fact, in Liverpool as in other major cities, there was an important debate about whether the mayor should operate at the ‘city’ or ‘city region’ level. There are powerful arguments for aligning across the region because the economy of a wider metropolitan area is dependent on the core city. Transport, fire and police services operate at this level.
There are loud echoes here of the debate that led the 1966–1969 Royal Commission on Local Government in England (the Redcliffe-Maud commission) to consider ‘city regions’. Commission member Derek Senior published a memorandum of dissent, which argued for a network of city regions (with a second tier of districts) across the country. The unloved metropolitan counties were introduced as a partial, watered-down, version of the idea in 1974, although Margaret Thatcher abolished them 12 years later when she was prime minister.
Manchester has created a ‘combined authority’ for the ten-district Greater Manchester area. With a powerful, dynamic and articulated style of city-region leadership, the area has shown how it is possible to deliver consistent policies across a voluntary city-focused region. Other large cities have looked at the Manchester model and begun to evolve their own versions of city-region dynamism. But there are big questions about the resources and political will that will be necessary to roll out this model.
The government needs to support new mayors and city-based governance arrangements with a substantial shift of powers away from Whitehall. The new ‘city deals’, which allow the eight largest core cities to specify the powers they need to boost local economic growth, have proved complex and tortuous to negotiate. Nor is it clear why central government, which is generally unwilling to cede power to any local institution that is not controlled from London, will deliver on this objective. Schools are now little more than satellites of the Department for Education.
The national economy needs cities and their regions to function much more productively in the future. In fact, they are vital engines for the much sought-after economic growth. However, government policy in this area appears to be having a negligible, or invisible, effect. A recent report from the National Audit Office pointed out that employment supported by the Regional Growth Fund had cost about £33,000 per additional job generated. This compares with £28,000 per job created by the now-abolished regional development agencies.
Moreover, the NAO stated: ‘We cannot say what the Fund’s contribution will be to rebalancing the economy in any particular area in the longer term’ or if the fund will assist cities towards greater entrepreneurship and job creation.
Policies, such as the RGF, infrastructure investment, changes to the tax system and next April’s reforms to business rates are the closest the Coalition has come to an economic policy to boost growth. With official figures suggesting the country is now in a second recession and the eurozone providing little joy, there is a powerful political imperative to deliver an economic recovery. Governments that cannot show signs that the recession is ending look set to lose office at the first opportunity available to voters.
National politicians appear increasingly enfeebled as the catastrophic endgame of the eurozone crisis lurches towards us. Summits of European leaders, the European Central Bank or the International Monetary Fund lead to last-minute action to stave off disaster for another month or two but, like the climax of a horror film, there is always another shock.
Opinion polls in the UK show the electorate believes all three major party leaders are under-performing. In one recent YouGov poll, the net ‘doing badly’ figure for David Cameron, Ed Miliband and Nick Clegg was 29%, 23% and 54% respectively. Gloom about the future of the UK economy and households’ finances appear overwhelming – all of which is felt even more keenly at the local level.
Turnout at May’s local elections in England was 32%, and only slightly higher in Scotland. At the 2010 UK general election, the figure was 65%, one of the lowest in modern times, though slightly better than the 59% achieved in 2001. It is almost a cliché to speak of ‘voter disengagement’, but there can be no doubt the electorate is becoming less attracted by conventional parties, leaders and policies. Continuing pressure on the political system created by the impact of the eurozone’s difficulties is likely to incite further anger on the part of voters.
Many of the government’s public service reforms will begin to take effect during 2013 against this backdrop, often with significant implications for local authorities. In particular, the NHS reforms and Universal Credit will begin to bed in, leading to unpredictable impacts on services and households. At the same time, public health will transfer to local government from primary care trusts while Council Tax Benefit will be ‘localised’. Fifty per cent of the national non-domestic rate will be locally retained from next April, with the inevitability of winners and losers as the impact of tax base incentives begin to be felt. Planning reforms, notably neighbourhood forums, will get going in earnest in 2013. Finally, several reforms affecting social housing, notably a move towards higher, market-related rentals and constraints on ‘under-occupation’, will also have their first effects next year.
Next year will, to put it mildly, be a ‘Big Bang’ year for the public sector. Against the economic, financial and political backdrop outlined above, it is hard to guess what the public response might be to reforms that caused dislocation or a reduction in service quality. Of course, the government has introduced this raft of reforms because it wishes to shake things up. But most of the legislative changes made during 2010 and 2011 will affect services in unpredictable ways. No one really knows how, for example, reforms to the benefit system will affect families and households. If the economy continues to stagnate, people will be given incentives to take work in an enfeebled labour market with few, if any, new jobs.
Local government and councillors (and, indeed, MPs) are likely to have an important role as the impact of public service reforms is felt. Councils will assume public health responsibilities as they face a new incentive-driven local government finance system, offering authorities the possibility of keeping growth in both the business rate and council tax base. But councillors and their officials will also be in a position to judge how public service reforms are playing out on the ground. This is an opportunity for local government to assess the impact of the coalition’s policies and guide them.
Central government itself has very little capacity to monitor the effects of its policies, still less to take action to reduce any failures. The Home Office’s slow and inadequate response to recent immigration queues at Heathrow and Stansted airports is, along with defence and IT procurement problems in Whitehall, a living monument to the centre’s incapacity to manage operational services and projects. The need to bring in ex-local government chief executives to manage the more awkward Whitehall agencies attests to the skill and quality of council officials.
We are now a year and a quarter into what might be a decade of public sector austerity. Only a small part of the overall spending reductions that will have to be made have yet occurred. Even if the government changed path, or if Labour won the next election, it is unlikely there will be a return to significant growth in public expenditure before the early 2020s.
The world – or at least Europe – has changed in ways that will shape both the public and private sectors for a generation.
This reality leaves the current generation of UK party leaders with a problem. David Cameron, Ed Miliband and Nick Clegg (and, indeed, Carwyn Jones, Peter Robinson and Alex Salmond) are conventional politicians who will now have to watch the world as it changes and subsequently react as best they can.
UK prime ministers and Opposition leaders are by no stretch of the imagination in charge of their own destinies at present. Germany’s Angela Merkel and China’s Wen Jiabao now control financial levers that even Barack Obama cannot pull. Meanwhile, the US is following the UK down the road of relative economic and political decline.
Chancellor George Osborne’s Plan A has been undermined by the crises in Greece and other southern European countries. His shadow, Ed Balls, would not be immune from the same forces if he were chancellor. Ironically, just as national politicians face a deepening credibility crisis, the government’s localism project has also lost much of its lustre. Perhaps this is inevitable in a period of such deep public cynicism and gloom.
What UK national and local politicians need to do is to make clear to the electorate what the future realities are likely to be for this country’s economy and public services. There will be no return to big real-term rises in health and education spending for several years. The main focus must be the generation of private sector jobs and output in all parts of the UK.
The public sector will have to take second place to this overriding objective, however unpalatable this might be. Only infrastructure investment is likely to buck this trend. Unless the economy can be fixed, resources for public services will remain limited for a generation.
The good news is that cities and city-regions – if only politicians will find ways to reboot them – can be part of the solution, not the problem.
Tony Travers is director of the Greater London Group at the London School of Economics and a well-known commentator on local government
This article first appeared in the June edition of Public Finance
